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China auto sales growth accelerates on rising SUV demand

[SHANGHAI] China's passenger-vehicle sales expanded at a faster pace in the first half, as rising demand for SUVs and new-energy vehicles widened the nation's lead as the world's biggest auto market.

Retail sales of cars, sport utility vehicles and multipurpose vehicles climbed 9.5 per cent to 10.8 million units in the January-June period, according to the China Passenger Car Association. Honda Motor Co, Toyota Motor Corp and Daimler AG's Mercedes-Benz gained share as growth in industrywide deliveries outpaced last year's 8.4 per cent gain.

Demand for SUVs has been rising as increasingly affluent Chinese buyers opt for more spacious vehicles, a trend that may continue with the scrapping of the country's decades-old one- child policy. The reduction in the purchase tax on vehicles with engines smaller than 1.6 litres in October also provided a tailwind for sales of compact and mid-sized SUVs.

"Sales of SUVs continue to be robust as Chinese families who plan to have a second child are keen on the size and height of the car," said Zhang Xin, chief auto analyst with Guotai Junan Securities in Beijing.

"SUVs with small engines that are more fuel-efficient are becoming the trend."

Deliveries increased 18 per cent to 542,527 for Honda, while Toyota's rose 16 per cent to 592,100 units in the first half. Mercedes-Benz sales surged 32 per cent to 229,137.

SUV Attraction

SUVs accounted for 35 per cent of total passenger-vehicle sales in the first six months, compared with 27 per cent in the same period a year earlier. That's also in part been driven by more local manufacturers introducing cheaper models in the segment to woo buyers. Industrywide deliveries rose 19 per cent to 1.7 million units in June.

The operating costs for Chinese customers to switch from sedans to SUVs are low because domestic automakers offer less expensive SUVs than their foreign competitors, according to Steve Man, an auto analyst at Bloomberg Intelligence.

The more than doubling of sales of electric vehicles stand out as the government accelerates construction of charging points to serve 5 million electric vehicles by 2020.

China, which surpassed the US as the largest market for electric vehicles last year, wants sales of what it calls new-energy vehicles to exceed 3 million units a year by 2025.

Electric Vehicles

Deliveries of new-energy vehicles surged 126 per cent to 86,374 units in the five months through May, according data on the association's website. BAIC Motor Corp's BAIC E series was top-selling electric vehicle in the January-May period, while BYD Co's Tang SUV was the best seller in the plug-in hybrid category.

One segment that was an exception to the growth trend was mini commercial vehicles, with sales falling 34 per cent to 374,208 units in the first half.

Among global carmakers, sales climbed 5.3 per cent to 1.81 million units for General Motors Co, 6 per cent to 577,097 units for Ford Motor Co.and 3.8 per cent to 609,900 units for Nissan Motor Co.

China's Geely Automobile Holdings Ltd's deliveries gained 11 per cent to 280,337 units and Guangzhou Automobile Group Co's sales increased 29 per cent to 731,884 units.

BLOOMBERG